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A Layman’s Guide to Transferring Physical Shares into Demat Account
Guide to Transferring Physical Shares into Demat Account

Guide to Transferring Physical Shares into Demat Account

The entire world is turning digital, and the stock exchange is no exception. Since the commencement of the digital India campaign, the Indian government has been very keen on digitizing all operations and eliminating paper. This not only helps the environment, but it also solves the problems related with paper documents. However, questions such as “how to convert my physical shares into demat?” can still be found. In this blog, we will learn in simple steps how to the transfer physical shares into demat accounts.

Why is Share Transfer to Demat Account Needed?

Before beginning the share transfer process, one must first understand why this procedure is required in the first place. When stock trading first became popular in the 1970s or 1980s, there were only actual share certificates to prove ownership of the shares. Furthermore, stock dealing entailed physically exchanging share certificates. Physical share certificates were riskier to trade since they may be destroyed for a variety of reasons. There was also the possibility that they might be misplaced or stolen. Even stock trading needed the actual presence of the shareholder, making it difficult for people from other regions to participate in the stock trading industry.

To address these issues, the government and market regulator devised a digitized form of share. The digital shares were simple to exchange and did not require the shareholder’s physical presence. The government also created a unique demat account that was designed particularly for stocks. This was a significant step toward the total digitalization of the Indian stock market and trading activity. It is now customary for shareholders who want to trade their equities online to convert their shares into digital form. The procedure is known as share dematerialization or demat of shares.

Procedure for Share Transfer 

Shares that are physically present with stockholders are often from their parents or grandparents. These may only be moved to a Demat account once they have been dematerialized. According to a circular issued by the Board (SEBI) in 2019, a share transfer request to the shareholder’s demat account cannot be performed if the shares are not in their dematerialized form. The request, however, contains the following exceptions.

  • Transmission of Shares

The transmission of shares differs fundamentally from the online transfer of shares. This signifies that the shares’ whole ownership is being transferred to another stakeholder. For example, if you wish to have your parents’ shares in your own demat account, you must first get the shares transferred to your name. As a result, you will be the new owner of the shares. Following that, you can request that physical shares certificate be converted to digitized or dematerialized form before being transferred to your own demat account. In such a case, share ownership can be transferred by succession certificate or inheritance.

  • Transposition of Securities

The process of modifying or rearranging the order of shareholders is referred to as this procedure. This procedure differs from transfer in that it just includes the rearrangement of names.

Steps of Transferring Shares to Demat Account

  • If a shareholder owns physical share certificates for a company’s shares that are actively traded in digital form, he must convert them to dematerialized form. Following that, the shares must be moved to a Demat account in order to continue trading. The following stage in the procedure is to open a demat account.
  • Opening a demat account is a straightforward process that may be accomplished online. To open the same account offline, an investor must meet with a representative from a chosen brokerage firm. The investor’s KYC documents, such as an aadhar card and a PAN card, would be collected by the representative. An investor can transfer dematerialised shares to such an account after creating one.
  • The next step is to dematerialize the existing physical shares so that they may be transferred to the demat account. Four physical share certificates can be converted to digital form using a single DRF or Dematerialisation request form. An investor must file multiple sets of DRFs if he or she owns more than four share certificates. These DRF forms, together with the relevant KYC documentation, must be sent to the shareholders’ brokers. The broker forwards the necessary documentation to the registrar or transfer agent of the firm whose shares are being converted. The registrar transforms such shares into market-value equivalent digital shares. Following conversion, the identical number of shares will begin to appear in the investor’s demat account.

Fee to Convert Physical Shares to Demat Form

The fee imposed by the broker to convert physical shares to digital form is the first expense that the investor must face in this conversion procedure. In general, broker firms impose yearly fees ranging from Rs. 200 to Rs. 850 in order to recruit additional investors or for marketing purposes. The transaction fees for this process vary from broker to broker for the same reason. As a result, before beginning the process of share conversion, the investor should compare prices from several broker businesses. Conversion fees for actual shares typically vary between 150 and 400 rupees per share certificate. The charge varies amongst brokers since some offer extra services in addition to conversion. The software conversion procedure may also be performed with the help of internet specialists. According to the SEBI announcement, the registrar must complete the entire process of share conversion within 21 days, unless there are exceptional circumstances.

Documents Required to Convert Physical Share Certificate to Demat 

The following are the necessary documents for transferring physical shares to Demat India:

  • Aadhaar card/PAN card
  • Residential Proof
  • Bank Passbook Statement
  • The original copy of the stock certificates you own. The information on the physical share certificates must be visible and in good shape.
  • Form for Dematerialization shares
  • In the physical share certificates, each paper share must be marked “Surrendered for Dematerialization.” Get an acknowledgment slip for the shares you are surrendering, don’t forget.

Advantages of Dematerialized Shares

Share transfer to Demat Account has numerous benefits, some of which are listed below:

  • Safety: Dematerialization reduces the possibility of shares being stolen, falsified, or misplaced, enhancing the holding’s security. Theft is no longer an issue because they are kept in safe depositories.
  • Convenience: Due to the electronic nature of dematerialized shares(Convert physical shares into demat), issues with storage and upkeep are no longer an issue. You won’t have to worry about misplaced or damaged credentials any longer.
  • Accessibility: All sharing records are kept online and electronically. As a result, you may use the internet to access dematerialized shares (Convert physical shares into demat) practically anytime and almost anywhere.
  • Cost-effectiveness: Since electronic trading eliminates the need for time-consuming documentation, less money is spent.
  • Flexibility: Dematerialization (Convert physical shares into demat) boosted access for small investors by increasing flexibility. There are no more limitations on the number of shares that can be purchased or sold.

Why Choose Muds? 

Your aspirations will become a reality, and your long-lost shares claims will be recovered! 

Muds team of professionals is skilled in recovering your family’s or your own hard-earned physical shares certificates that have been lost, forgotten, broken up into shares, or left unclaimed. Our ability to make the impossible possible distinguishes us from rivals. The recovery of shares, claims for transferring Physical shares (Convert physical shares) and dividends are under our area of competence. To file an IEPF claim, our experts will follow all procedures and finish all documentation formally approved by investors.

Conclusion

Varying brokers charge different fees for converting physical shares and transferring them to a Demat account. They should ideally conduct some research before committing to any broker in order to obtain these services. An investor may locate a helpful broker firm that can handle the transfer procedure at a low cost with careful investigation. The process may be time-consuming for investors, so they should not spend their time completing the transfer processes. Having a trustworthy broker may help the organization save time and money.

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